Speaker: Prof William Magnuson (Texas A&M University)
Location: Moot Court Room
The work in progress seminars are open to all LLM/MCL and PhD students, Faculty members and Faculty visitors.
This talk examines the governance structure of private equity funds, how that structure has come about, and why it may lead to problematic results in practice. It is a common view today that private equity’s governance structure has largely resolved one of the fundamental tensions in corporate law, that is, the conflict between management and ownership. But this widespread perception about the corporate governance benefits of private equity overlooks the many ways in which the private equity model, far from eliminating conflicts of interest between management and ownership, in fact exacerbates them. These governance costs include compensation structures that incentivize excessive risk-taking, governance rights that provide investors with few avenues for effective information and control, and side agreements that allow for differential treatment of investors. Together, these arrangements create opportunities for private equity firms to extract rent from portfolio companies at the expense of their investors. This misbehavior carries immense public consequences, as the investors in private equity are often pension funds, endowments, and sovereign wealth funds. The talk will examine these problems and discuss potential solutions that could provide substantial benefits to investors and firms alike.
For more information about the activities of the Cambridge Private Law Centre, see the website or contact privatelaw@law.cam.ac.uk.
